(Or: “Yes, You Do Get Some of That Back — If You Do It Properly”)
When an employee tells you they’re pregnant, the focus quite rightly shifts to support, planning and making sure everything runs smoothly.
Then payroll steps in and quietly asks:
“Right. What are we paying, for how long, and what can we reclaim from HMRC?”
Because while Statutory Maternity Pay (SMP) is paid by the employer, it is not entirely funded by the employer — and this is where small businesses often don’t realise they may be entitled to additional support.
Let’s break it down properly, using HMRC and Acas guidance, without turning it into a government manual.
First: What Is Statutory Maternity Pay?
According to HMRC and Acas, an employee qualifies for SMP if she:
- Has been continuously employed for at least 26 weeks up to the 15th week before the expected week of childbirth
- Earns at least the Lower Earnings Limit for National Insurance
- Gives correct notice and provides proof of pregnancy (MATB1 form)
If eligible, SMP is paid for up to 39 weeks:
- First 6 weeks at 90% of average weekly earnings
- Next 33 weeks at the statutory rate (or 90% of average weekly earnings if lower)
SMP is processed through payroll like normal pay.
It is subject to Income Tax and National Insurance.
It must be reported via RTI on the Full Payment Submission (FPS).
So far, so normal.
Can Employers Reclaim SMP?
Yes.
HMRC confirms that employers can recover most of the SMP they pay.
Standard Reclaim: 92%
Most employers can reclaim:
92% of SMP paid
This is done by reducing the amount of PAYE and National Insurance you send to HMRC.
The reclaim is reported through the Employer Payment Summary (EPS).
Small Employers’ Relief: 103%
Now here’s the important bit for small businesses.
If your business qualifies as a small employer, HMRC allows you to reclaim:
- 100% of SMP paid
- Plus an additional 3% compensation
Total reclaim: 103%
That extra 3% is intended to compensate for employer National Insurance contributions.
Who qualifies?
According to HMRC guidance, you qualify if:
Your total Class 1 National Insurance liability for the previous tax year was £45,000 or less.
This includes both:
- Employer NIC
- Employee NIC
If your NIC bill is under that threshold, you qualify for Small Employers’ Relief.
This threshold should be checked each tax year.
How Do You Reclaim It?
There is no separate “grant form”.
Instead:
- SMP is paid via payroll.
- The reclaim amount is included on the EPS.
- HMRC offsets this against your PAYE liability.
If the reclaim is more than you owe in PAYE that month, you can:
- Carry it forward, or
- Apply to HMRC for a repayment.
All of this is managed through RTI submissions — exactly as HMRC outlines in its guidance.
Record Keeping Requirements
HMRC requires employers to keep SMP records for at least three years after the end of the tax year they relate to.
Records must include:
- Payments made
- Dates of maternity leave
- Evidence of entitlement
- Amounts reclaimed
Acas also stresses the importance of fair and consistent treatment during maternity leave, including:
- Keeping in touch days
- Maintaining contractual rights
- Ensuring no discrimination
Payroll and HR must work together here.
Important: This Is Not Optional
If an employee qualifies for SMP, the employer must pay it.
You cannot refuse because it feels expensive.
But equally — you are entitled to reclaim what HMRC allows.
Small businesses often underclaim simply because they don’t realise the 103% rule exists.
The Love Payroll Bit
At Love Payroll Limited, we make sure:
- Eligibility is checked correctly
- Average weekly earnings are calculated properly
- SMP is paid accurately
- The correct reclaim percentage is applied
- EPS submissions are filed on time
- Records are retained compliantly
Because maternity leave should be a positive life moment — not a payroll anxiety spiral.
Final Thought
Maternity pay is one of those areas where payroll quietly protects both sides.
The employee receives their statutory entitlement.
The employer receives financial support from HMRC.
But only if everything is processed correctly.
This isn’t just about paying someone while they’re off.
It’s about compliance, reclaiming what you’re entitled to, and keeping HMRC satisfied in the background.
And that’s exactly where we like them.
